How stable is the global economy?
Trump says he’s ending trade negotiations with Canada
President Donald Trump said late Thursday on social media that he was ending “all trade negotiations” with Canada because of recent television ads protesting US tariffs, which he called “egregious behavior” aimed at influencing US court decisions.
This as the private credit market slips…
World’s banking system risks a $4.5t shock from the shadows
The frenzied stock market sell-off that gripped the US and UK this week was fuelled by fear as much as fact. Investors saw what could easily be the tip of an iceberg, and nobody knows quite what lies beneath.
Two car parts suppliers with multibillion-dollar debts in the private credit market have gone bust amid allegations of fraud, and two regional US banks have uncovered a clutch of irredeemably bad loans.
But with Jamie Dimon, the JP Morgan boss, earlier warning that more “cockroaches” might scuttle out of the $3tn (£2.2tn) black box that is the private credit market, many investors weren’t prepared to wait and see if these were one-off problems.
“No one really knows if this is the full story,” says James Reilly, of Capital Economics. “So it just makes sense to take some of your chips off the table. We’re seeing a broad flight to safety as investors work out what is going on.”
Among the companies hit by the FTSE sell-off were the asset managers ICG and Schroders, which are seen as more exposed to the private credit market. But it also hit the big banks, most of which are now neck-deep in the private market themselves.
…this as the AI bubble continues to build…
‘We’re kind of in a fragile state now’: Why the AI bubble might be about to burst
Recent reports have led some to speculate that the AI bubble is about to go the way of the dot-com bubble circa March 2000 and burst.
…and starts to ensure it can’t be switched off…
AI models may be developing their own ‘survival drive’, researchers say
When HAL 9000, the artificial intelligence supercomputer in Stanley Kubrick’s 2001: A Space Odyssey, works out that the astronauts onboard a mission to Jupiter are planning to shut it down, it plots to kill them in an attempt to survive.
Now, in a somewhat less deadly case (so far) of life imitating art, an AI safety research company has said that AI models may be developing their own “survival drive”.
After Palisade Research released a paper last month which found that certain advanced AI models appear resistant to being turned off, at times even sabotaging shutdown mechanisms, it wrote an update attempting to clarify why this is – and answer critics who argued that its initial work was flawed.
In an update this week, Palisade, which is part of a niche ecosystem of companies trying to evaluate the possibility of AI developing dangerous capabilities, described scenarios it ran in which leading AI models – including Google’s Gemini 2.5, xAI’s Grok 4, and OpenAI’s GPT-o3 and GPT-5 – were given a task, but afterwards given explicit instructions to shut themselves down.
…add in the ongoing stresses catastrophic climate change are generating and the Global Economy looks ready to pop rather than grow.
We have soaring markets propped up by AI speculation that no one has made any profits on yet.
Add the geopolitical instability of Trump and the odds looked stacked towards a crash.
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Has the global economy ever been stable? Prior to and preceding Bretton Woods. Stability is a relative term.
World markets have been tender since Covid, and Trump’s style of market diplomacy, being unpredictable, has reduced stability. Gold prices have boomed, always a sign of market weakness, and Starmer’s neoliberalism is so unpopular in the UK he’s unlikely to complete his term. As Trump’s term limps to a close, the probability of an armed attempt to seize the presidency will further increase uncertainty.
The failure of National’s supposed growth strategy – a retread of the housing Ponzi, is unlikely to yield returns, as investors really prefer to be able get their money out again, and with the market exceptionally soft, that is not the case.
AI is likely to prove less productive than has been supposed – it is not without possibilities, but like computerized chess programs, many functions will take decades to become competitive with humans.